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Published on August 16, 2007

"He would like the Bank of Thailand to educate the public on the good things about the amendments to clear any possible misunderstanding in the purpose," the source said of the unexpected move.

Chalongphob asked the NLA to postpone its deliberation on amendments to the Currency Act till September 12. It was scheduled to start yesterday.

Ahead of the deliberation, some NLA members commented that the amendments would pave the way for the central bank to spend reserves "in mischievous ways". The funds raised by revered monk Luang-ta Bua are part of the reserves.

"This kind of misunderstanding once derailed the proposed amendment in the days when Khun Tarrin [Nimmana-haeminda] was the finance minister. Khun Chalongphob does not want a repeat of history," the source said.

The central bank will be instructed to organise activities, probably seminars, to educate the public on the details of the amendments. Then, the draft amendments could be changed to ensure approval. It would subsequently be considered by Cabinet again, before being forwarded to the NLA.

The source noted that Chalongphob temporarily backed off - though he agreed in principle with the draft amendments. The main point in changing the law is to reduce the government's burden in financing the Financial Institu-tions Development Fund's (FIDF) debts incurred from the bailout of financial institutions.

In principle, the central bank is obliged to issue bonds to absorb the principal debts, while the Finance Ministry is to shoulder the interest burden. However, the bonds could be issued only when the central bank incurs operating profits.

However, with accounting losses as a result of the baht intervention, the central bank was not in a position to finance the principal and therefore all the burden falls into the Finance Ministry's lap, the source said.

"The amendment would also allow more freedom to the central bank in intervening in the foreign exchange rates. This is necessary given the overwhelming capital inflows and the central bank must act promptly.

"Right now, it needs to seek the ministry's approval from time to time and the problem cannot be addressed promptly," the source noted.

Wichit Chaitrong

The Nation